Which country does Latvia receive more foreign investment from? What is the volume of these investments? How has Latvia become the favorite of investors? All are in our article.
There is a noticeable increase in foreign investments in Latvia. Although the total amount of foreign investment is more than €15 Billion, it is still possible to say that it is less than our Baltic neighbors Estonia and Lithuania. Most of these investments come from countries that are not members of the European Union, such as the United States, Switzerland and Canada. Due to trade wars and other global economic uncertainties, investment volumes in Latvia began to increase.
Foreign Investments to Latvia Have Increased 10 Times
According to Mārtiņš Panke, head of the Council of Foreign Investors in Latvia[1] , in the last century, foreign investment in Latvia has increased tenfold and continues to grow.
With an important trade agreement made this year, German producer Schwenk bought the northern European market of cement producer CEMEX, and food producer Orkla is building new plants in Latvia.
As in Latvia, foreign investments have started to increase in our Baltic neighbors, Lithuania and Estonia in the past two decades. According to Panke, Latvia attracted more foreign capital than these countries.
According to 2019 data; foreign investment in Estonia is approximately €24 billion, €18 billion in Lithuania and €16 billion in Latvia. These rates show that Latvia is a more competitive and potential country. Foreigners investing in the region decide to invest by comparing these three Baltic countries.
According to Panke, there are different reasons. Estonia and Lithuania managed to establish closer economic ties with their neighbors Finland and Poland. However, one of the main problems in Latvia is the labor problem.
Pointing out the role of local governments, Panke also states that projects preferred by foreign investments are not implemented due to the fact that local people are not open to innovations and objections.
The biggest advantage of investors investing in Latvia is the quality of human capital, professional experts and Latvia being a flexible and small economy. It is also an advantage to easily adapt to various changes. So, which regions do foreign investors invest in Latvia?
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In Which Fields Do Foreign Investors Invest in Latvia?
According to Panke, it is very difficult to distinguish. Because, some regions are not regions where foreigners can invest. For example, there are some restrictions in the waste management and construction sector. The most suitable sectors for investment are the service and retail sectors.
Panke said Latvia’s long-term competitiveness should be taken into account. In other words, foreigners who want to invest in Latvia prefer Latvia because of the low labor costs, but as demand increases, they can choose other places. According to Panke, there should be new investors with higher added value and a different investment quality in the long run.
Countries such as Sweden, Estonia, Lithuania and Russia are among the countries that invested the most in Latvia. According to the data obtained from the Latvian Bank, 4/3 of foreign investments in Latvia come from EU countries.
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Latvia’s Advantageous Sides in Foreign Investment
Latvia has much strength in this area. First of all, with its joining to the European Union in 2004, its access to the European market has become much easier and its trade volume has increased significantly. With the development of diplomatic relations, it has increased its cooperation in many fields. This was felt very positively on Latvia’s political stability as well.
Another important advantage is its strategic geographical location. Due to its close location to the Russian market, the trade volume has quite developed with this country. Having historical relations in the Soviet period, these two countries continue to grow their relations also economically by developing their trade.
Although the labor force in Latvia is cheap, high efficiency is another very important advantage. This country has been a favorite of many investors for its simple and low taxation principle. This also creates a competitive business environment.
Latvia was selected as the 19th country where the business is done the easiest in the World Bank’s 2020 Doing Business Report [2].
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Latvian Government’s Foreign Investment Incentives
Latvia has opened the country to foreign investors to support its political independence with economic independence. At this point, it has provided many incentives and financial assistance to attract foreign capital to the country. Especially the breakthroughs in the industrial sector with high technology and the facilities they provide have carried the sector to a very advanced level.
The government offers foreign investors the same rights as local investors. Every company has the opportunity to be established entirely with foreign capital. There is also no sector restriction. These companies even have the right to receive government funding.
Igors Krumins continues his activities as a commercial and international lawyer within the body of “Jurmala Invest”. He has more than 10 years of experience, especially in the investment sector, and has provided consultancy services to numerous companies with his legal expertise. He successfully completed his undergraduate studies at Baltic International Academy and graduate studies at Latvijas Universitate. Apart from his native Latvian language, he can also speak Russian and English fluently.
